Stronger framework for green bonds receives SEBI nod

Increasing interest in sustainable finance in India as well as around the globe have triggered the measures to align the extant framework for green bonds with the updated Green Bond Principles (GBP), which is recognised by IOSCO.

PTIUpdated: Wednesday, December 21, 2022, 09:55 PM IST
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Markets regulator SEBI on Tuesday decided to strengthen the framework for green bonds by introducing the concept of blue bonds and yellow bonds as new modes of sustainable finance.
     
The concept of blue bonds is related to water management and marine sector while yellow bonds pertains to solar energy. These are sub-categories of green debt securities.
     
Also, the regulator will specify the basic dos and don'ts relating to green debt securities to address 'green washing' related risks, SEBI said in a release after its board meeting here.
     
'Green washing' which is defined as the practice of channelling proceeds from green bonds towards projects or activities having negligible environmental benefits. 
     
Further, the watchdog will strengthen the framework for green bonds by enhancing the scope of definition of green debt security by including new modes of sustainable finance in relation to pollution prevention and control and eco-efficient products.
     
These measures have been taken in the backdrop of increasing interest in sustainable finance in India as well as around the globe, and with a view to align the extant framework for green debt securities with the updated Green Bond Principles (GBP) recognised by IOSCO.
     
SEBI to "introduce the concept of blue bonds (related to water management and marine sector), yellow bonds (related to solar energy) and transition bonds as sub- categories of green debt securities", the release said.
     
The regulatory framework defines Green Debt Securities (GDS) as debt securities issued for raising funds that are to be utilised for projects or assets falling under certain categories.
     
Indian companies raised nearly USD 7 billion through ESG (Environmental, Social and Governance) and Green bonds in 2021 compared to USD 1.4 billion in 2020 and USD 4 billion in 2019.
     
Most of the green bonds issued by Indian issuers are listed on offshore exchanges as issuers are finding it more attractive to list on bourses falling outside Sebi's framework.
     
In its consultation paper issued in November, Sebi said that one of the main hurdles for further growth has been a consistent and robust approach to identifying what is considered 'green'.
     
A lack of clarity in this regard leads to green washing.

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